NEW ORLEANS, Aug 31 (Reuters) - The remnants of HurricaneIsaac continue to cause headaches on Friday, bringing heavyrainfall and the threat of flash flooding to the lowerMississippi Valley as Gulf Coast residents get ready to starttheir cleanup efforts.

The first hurricane to hit the United States this year willbe remembered for striking New Orleans on the anniversary of2005's deadly Hurricane Katrina - and providing a first,successful test of the city's pricey new flood defenses.

New Orleans Mayor Mitch Landrieu concluded that the ring ofdefenses was "operating as designed."

Now a tropical depression, Isaac can still trigger tornadoesin Mississippi and Louisiana, the National Hurricane Center said- among the final acts of a storm that punched above its weightin terms of impact and often confounded forecasters.

One bright spot: rain that is expected to reach the centralU.S. Midwest over the weekend, a godsend to farmers sufferingfrom the worst drought in more than 50 years, even if too latefor many of this season's crops.

Isaac caused widespread flooding and property damage in theU.S. Gulf Coast region, mostly because of its unexpectedly heavyand persistent rainfall. The system lingered near New Orleansfor the best part of two days, sometimes moving as slowly asfive miles an hour (8 km per hour).

"Most of them blow through and are over with. This one isjust hanging around too long," George Dubaz, a New Orleans tourguide, said during the deluge.

The storm caused anywhere from $700 million to $2 billion ininsured onshore losses, disaster modeler AIR Worldwide said lateThursday.

That would still leave Isaac, which came onshore as aCategory 1 hurricane, well outside the 10 most costly U.S.hurricanes.

New Orleans' Audubon Park recorded 18.7 inches (47.5 cm) ofrain in a 24-hour period during Isaac. That exceeded all recordsdating back to 1871, said Jeff Masters of Weather Underground.Many other locations in Louisiana and Mississippi logged morethan 10 inches (25.4 cm) of rain.

Through it all New Orleans sustained mostly cosmetic damagesuch as downed trees and street lights. A massive police andNational Guard presence - and a dusk-to-dawn curfew, now lifted- also helped keep things calm even as much of the city lostpower.

The Port of New Orleans and the city's airport were ready toreopen on Friday, authorities said.

Surrounding areas, though, without the new protective federalflood barriers, did not fare as well from the relentless rainand huge storm surges brought forth by Isaac.

Some of the worst flooding was in Plaquemines Parish,southwest of New Orleans, where flood waters overtopped at leastone levee and left many homes under about 12 feet (3.6 meters)of water.

Late on Thursday, local officials confirmed the death of aman and a woman in the parish town of Braithwaite. The pairapparently drowned in their kitchen as flood waters surged in.Earlier, a Mississippi man died after being hit by a fallingtree.

Isaac killed at least 23 people in Haiti and the DominicanRepublic before taking aim at the United States.

Slidell, a town of about 27,000 people northeast of NewOrleans, took the brunt of a storm surge from LakePontchartrain, which left some neighborhoods under about a foot(30 cm) of water.

"You'd have never made me believe a Category 1 would dumpthis much water," said Sam Caruso, 71, a former mayor of Slidellwho toured the town in his pickup truck on Thursday.

As the flood waters rose, some residents, including Caruso,wondered whether the new federal levee system had shored up NewOrleans at the expense of low-lying neighboring parishes outsidethe system's protection - a debate that is likely to continue.

Benchmark crude oil prices slipped on Thursday after majoroil facilities on the Gulf of Mexico made it through Isaacmostly unscathed.

The smallest of six Louisiana oil refineries began to powerback up on Thursday and most other oil and gas companies in theU.S. Gulf Coast region were preparing to restart.

Some 700,000 residents and businesses in Louisiana andMississippi were still without electricity on Thursday, downfrom a peak of over 1 million.